The Auditor General of Pakistan revealed that a total of Rs 1.44 billion funds of Old-Age Benefits Institution (EOBI) have been blocked for last seven years and the institute faced loss of more than Rs 721 million during this period. According to Audit Report 2011-12 on the Accounts of Public Sector Enterprises, a proposal was submitted in a meeting of EOBI Investment Committee held on March 2005 for acquiring 300-400 residential plots in DHA Islamabad for the employees.
It was planned to float entitlement rights for plots in Phase-II Extension. It was also submitted that the price was yet to be fixed; however, DHA had offered the approximate price ranging between Rs 3.5 million to Rs 3.6 million for a 500 square yards residential plot.
The report says that the DHA administration had indicated that if EOBI was interested in acquiring plots, it should indicate its requirements within 10 days. The Committee decided to acquire 400 plots of 500 square yards at an approximate rate of Rs 3.5 million to 3.6 million.
Audit maintained that the investment of Rs 1.44 billion for 400 plots was made in haste without any feasibility study. The per unit price of Rs 3.6 million at a flat rate for all the 400 plots was agreed by the management without any negotiations and without ascertaining locations of the plots. Any marketing plan for the subsequent disposal of such a huge number of plots was also not prepared. Resultantly, the total funds of Rs 1.44 billion have been blocked due to this imprudent investment. Had the management invested Rs 1.44 billion in Special Saving Certificates in March 2005, EOBI could have earned Rs 721 million up to March 2010.
Accordingly, the EOBI Investment Advisor informed DHA on the same day about the decision of the Committee. The DHA through its letter dated March 10, 2005 offered final per unit price as Rs 3.6 million for 400 plots and advised that the total cost of Rs 1.44 billion be deposited by March 26, 2005.
The EOBI deposited RS 1.44 billion through a Demand Draft on March 24, 2005. In addition, EOBI also paid Rs 167.7 million on account of development charges/other fee up to December 2010. However, Audit observed that the land was not developed and the possession of the plots was not handed over to EOBI by DHA Islamabad till the close of audit in December 2010. An evaluation report of an independent agency which was carried out at the instance of EOBI revealed in July 2009 that per unit value of the plot had not increased since purchase.
The matter was brought to the notice of the management in January 2011 through Audit Inspection Report. The management in its reply dated April 6, 2011 stated that the investment was made with the approval of the Investment Committee and communicated to DHA quickly to avail opportunity. The management further stated that the objective was to invest over a period of 10 to 15 years to drive highest risk adjusted returns over other asset classes.
The reply was not tenable as at the time of the investment DHA had not announced the scheme publicly. Even the prices of the plots were not fixed by DHA as the scheme was at the planning stage. Therefore, there was plenty of time for the management to make the investment after due diligence. Further, the management accepted the offered unit price at a flat rate for all the 400 plots irrespective of their locations, this action was a lapse on the part of the management.
The matter was discussed at DAC meeting held on December 14, 2011. The DAC directed the management to provide the documentary evidence to Audit that the investment was prudent and all codal formalities were adopted before investment. However, no progress in supply of record for verification was made by the management till the close of audit in December 2010. An evaluation report of an independent agency which was carried out at the instance of EOBI revealed in July 2009 that per unit value of the plot had not increased since purchase.